New client has a successful company with €650k cash (accumulated trading profits) on the balance sheet, and this will grow to €1m after another year. He has maxed out his pension and his wife’s pension. He is 56, wife is 50.
He personally owns a warehouse worth €600k?(bought for €100k).
Like many clients these days, he has “done his own research” which he is double-checking with you. He “may consider” ceasing the business but might like to start something similar in a new company.
It's the "profit extraction" problem.
- Salary/dividends, company car etc - 50%+ tax
- Loan from company - company must withhold 20% income tax - write off is taxed
- Income-splitting (bona fide family employees)?
- Foreign earnings deduction (max €35k)
- Sell property to the company - 33% and get director loan for the value of the property
- Company buys back your shares - may qualify for retirement relief (no tax), entrepreneur relief - 10%, or 33% CGT
- Entrepreneur relief - 10% CGT - up to €1m of gains - ensure spouse/civil partner is co-shareholder for 3 years to double the relief - if same business restarts in a new company - caught for income tax (s 817)
- Tax-free benefits: tax-free voucher (€500 p.a.), company pension contributions, bona fide travel and subsistence, mobile phone, laptop, bike to work, home broadband, relocation expenses, pool cars, surrender of company R&D credit
- Sell property (or asset) to the company (assuming you have loss to cover the gain, or property was bought 7/12/2011-31/12/2014) and get director loan for the value of the property
- Retirement relief - up to €750k per person?aged 55 or over -?ensure spouse/civil partner is co-shareholder for 10 years to double the relief
Managing Director at Parolla
2 年Nice succinct summary Alan